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to TroMetro, and TroMetro purchased and assumed from SMP, SMP’s
right, title, and interest in the $81 million receivable.
As a result of the sale of the $81 million receivable, SMP
reported the following information on its 1998 Form 1065 with
respect to the $81 million receivable:
Date acquired 12/30/93
Date sold 12/10/98
Sales price $1,400,000
Cost or other basis $81,590,418
Gain or (Loss) for entire year ($80,190,418)
The $80,190,418 loss flowed through to Somerville S Trust.
3. Purchase Price Determinations
Mr. van Merkensteijn testified that the purchase price for
the $150 million receivable and the $81 million receivable was
determined as percentages of the total value of SMHC’s assets,
after applying a discount. He testified that the total value of
the assets in this calculation was based on an appraisal that Mr.
Lerner had obtained from Sage Entertainment.46 Mr. van
Merkensteijn did not obtain his own appraisal of SMHC’s assets.
4. Payments on the TroMetro Notes
On December 21, 1998, TroMetro made a $557,046.35 payment to
SMP on the $2,284,000 TroMetro note. This payment consisted of
$397,166 principal and $159,880.35 interest. It was the only
46 At some point, Mr. Lerner had asked Sage Entertainment
for an opinion valuing the EBD film library. He had obtained an
opinion from Steve Kutner of that company valuing the library at
approximately $29 million.
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